Seven digital luxury myths

By The Drum - 23 November, 2017

We are in an era where technology is enhancing, disrupting and integrating into the world of luxury, yet so many misconceptions exist regarding the entwined worlds of luxury and loyalty. Here is where we dispel the myths.

1. Luxury customers are silver haired and digitally backwards

The average age of customers for luxury brands is surprising in that the customer who is most able to make repeated luxury purchases has no children, is aged between 25 and 45 and is from either Asia or the Middle East. I think luxury brands often have decision makers in the marketing team who are nervous of change and of using new technology and scaring off the older generation. However, the older generation still uses apps and love loyalty schemes. It’s important to not let your view of your audience stay in the past and be careful not to make too many assumptions about your audience, thinking that all luxury consumers are old or western.

2. Luxury customers don’t want a loyalty scheme

A study by Bond revealed loyal customers spend 67% more than new ones. It costs five times more to attract a new customer than it does to retain an existing one, and in luxury cost per acquisition is supremely high. So why then do so many luxury brands not invest in a loyalty scheme? Burberry, Ralph Lauren and many others do not have a scheme in place. Luxury customers do repurchase, gift and return time after time. Meanwhile, non-luxury e-commerce loyalty is thriving. Asos A-List, for example, is a points-based tier scheme. Not having strong loyalty schemes in place can result in missing out on millions of pounds of revenue.

3. Loyalty schemes are about ‘points mean prizes’

A loyalty scheme doesn’t have to be points-based either, especially in luxury. A great example of loyalty and elevated customer experience cross-channel, and particularly in mobile, is from John Lewis. The John Lewis app has features such as e-receipts, loyalty cards and many other great shopping tools. Not surprisingly, it is its highest converting sales channel. Its most loyal customers love the app. Meanwhile, retailers such as Walmart offer in-store context so when it detects you are on wifi in-store it gives you wish lists and helps with wayfinding rather than selling to you like you are on a sofa. Smart solutions, experiences and empathy are more powerful than asking your customers to convert points into value in their head. Which brings us on to experience.

4. Amazon Prime is not a loyalty scheme

Amazon is opening physical retail stores and blurring the line between physical and digital with points of sale powered by digital behaviour. Arguably, Amazon Prime can be said to be the world’s most successful loyalty scheme. Members gain access to better prices, quicker delivery, great content services and exclusive sales events such as Prime Day. They even pay for the privilege. The basic math for Amazon is the more Prime customers it gets globally, the more money it makes, the higher its share price goes. Prime is one of the world’s best loyalty schemes in terms of the behaviour it generates.

5. Justifying price is more important than emotional connection

Apple’s strategy is slightly different. It never really does sales events or loyalty schemes because you can see it doesn’t need to. Instead it offers excellence of hardware and software that people buy time and time again because they love it and are locked into the ecosystem because they can’t easily get the same experience elsewhere. When you are in-store the atmosphere is unique: the staff are impeccable and the product is there to be played with. It is a cathedral of brand and product experience. By touching the goods you become more emotionally bonded with the product which, in-turn, makes you more likely to purchase. This is why the laptops are at funny angles. They want you to touch them and then you end up buying. Sneaky stuff. So while Apple does justify price, its website is excellent, the product benefit copy is crisp, it is the way it gains your emotional connection that is one of the key ways it is winning. This means its customer base is also its fan base and is incredibly loyal. Look at the queues when new hardware launches.

6. Status is not important

In luxury, loyalty programs are often a badge of honour. Luxury brands drive best-in-class experiences by recognising the member’s status by providing access, exclusivity and communicate clear emotional and rational rewards and experiences. British Airways' (BA's) premier, gold, silver, bronze and blue tier system lets loyal, high-value customers enjoy an elevated experience, with the app for example showing progress, status, tickets etc. BA’s highest, almost-secret level is called ‘premier’. These customers can enjoy access to Concorde rooms while other loyal customers gain access to the various lounges or enjoy shorter queues, preferential point multipliers and time windows and elevated service levels. Delta takes this even further – its elite tier is called 360 and these customers receive gate-to-gate transfers in a Porsche Panamera in Atlanta. Being driven on the runway in a Porsche when you are not expecting it is a story to tell your friends about. It is all about status and customer experience.

7. You need an app

The key with luxury and loyalty is to ensure a joined-up experience across all physical and digital channels, and to offer rewards and recognition that are easy to digest and articulate – often the elevated experiences and exclusivity route of airlines. 57% of consumers want to engage with their loyalty programs via mobile devices, but 49% don’t know whether there is an app associated with their loyalty program. Burberry, Apple and John Lewis have brilliant shopping apps. They are brilliant because they don’t exist in isolation but enable omni-channel experiences that are special to use and make life easier. Mobile is a river, not an island. Having an app is not a strategy, finding out where to provide the value and create moments that matter, and then joining this up across physical, staff, organisational silos, technology and then making sure people download it, is where the party is at. It’s not about the tech format, it’s about the value, proposition and being where the consumer needs you.

David Skerrett is chief strategy officer at Nimbletank.

This article was originally published in The Drum Network luxury special.